Financial Statements of a Sole Proprietorship

These flashcards cover essential vocabulary related to the financial statements of sole proprietorships, including key definitions and concepts from the module.

Sole Proprietor/Sole Trader

An individual who owns and operates a business alone, responsible for its debts and profits.

Statement of Profit or Loss

A financial statement that summarizes the revenues, costs, and expenses incurred during a specific period.

Statement of Changes in Equity

A financial statement that shows the movement in equity from the beginning to the end of the accounting period.

Statement of Financial Position

A financial statement that provides a snapshot of a company's assets, liabilities, and equity at a specific point in time.

Equity

The value of the owner's interest in the business after liabilities have been deducted.

Drawings

Withdrawals made by the owner from the business for personal use.

Capital

The amount of money or assets that the owner contributes to the business.

Comprehensive Income

The total change in equity from non-owner sources, including net income and other gains and losses.

Assets = Equity + Liabilities

The fundamental accounting equation that represents the relationship between a company's resources and its obligations.

Depreciation

The allocation of the cost of a tangible asset over its useful life.

Adjustments

Corrections or modifications made to the financial statements based on new information or events.

VAT Control Account

An account that tracks the VAT (Value Added Tax) receivable or payable by a business.

Closing Entries

Journal entries made at the end of an accounting period to transfer balances from temporary accounts to permanent accounts.

Pre-adjustment Trial Balance

A list of all accounts and their balances before adjustments are made.

Journal Entries

Records of financial transactions that are posted to the accounting system.

Financial Statements

Formal records of the financial activities of a business, including income statements, balance sheets, etc.